There can be few more demanding environments for a mobile operator than Palestine. Jawwal's CEO, Amar Aker, tells George Bevir how the company is facing up to its many challenges

The chief executive officer of Palestine's only licenced mobile network estimates that if the operator's current rate of growth continues then in two years time it will not be able to keep up with demand. Amar Aker, Jawwal CEO, says that the network has been operating with "a minimum of frequency" for years, and that Israel has never responded to the company's requests for additional frequency.

Technically Palestine is the only mobile monopoly in the Middle East, but ever since the first call was made on Jawwal's network in 1999, the Paltel subsidiary has had to compete with four Israeli operators. A second Palestinian mobile operator, Wataniya Palestine, was due to launch last month and when it eventually does Aker claims it will actually help Jawwal.

He says that having a domestic rival will allow Palestinians to compare Jawwal to an operator that is subject to the same constraints as his network, restrictions which Wataniya Palestine is experiencing at the moment as it struggles to get the frequency it needs to launch.

Over the past month Tony Blair, former UK prime minister and representative of the Middle East Quartet of the US, Russia, the United Nations and the European Union, has been working to get the frequency released by Israel as part of his wider remit to mediate the peace process between Palestine and Israel.

In May last year, Blair announced that the government of Israel had approved Wataniya Palestine's entry into the market and agreed to release limited frequency to test its network and then more for it to launch. A month later Israel signed an agreement to release 4.8 MHz by April this year for the commercial launch of Wataniya, and, "in due course" a further release of another portion of frequencies to allow for an expansion of the network.

According to the Office of the Quartet Representative, Israel also agreed to release "a sufficient portion of frequencies for the expansion of Jawwal to comply with the PA's nine-year old request in 2000".

Some reports have suggested that Jawwal, which will soon be rebranded Zain as part of the Kuwaiti operator's acquisition of parent company Paltel, needs to shift some of its own frequency for Wataniya Palestine to use before more is released by Israel. Aker dismisses the notion, and he says that it is an attempt by Israel to shift the burden of responsibility to the Palestinian Authority (PA) and Jawwal.

Aker, who joined Jawwal as chief financial officer in 2001 before taking over as CEO in 2005, says Jawwal does not have any frequency to spare. "We operate with a minimum of frequency, which is a maximum of 4.8 MHz, although it is not fully exclusive to us. It can hardly accommodate our current needs," he says.

The Office of the Quartet Representative says that there are available frequencies on the 1800 MHz band that would allow Israeli authorities to make previously agreed allocations to the PA. It says there is currently 40MHz available out of the 75MHz on the 1800MHz band, according to a recent scan conducted by Ericsson.

Israel's Ministry of Communications has claimed, without elaborating, that the PA has failed to undertake certain conditions set out in the agreement. When asked by CommsMEA why the frequency had not been released, Israel's Ministry of Communications said "the Palestine side is encountering difficulties to fulfill their part", without elaborating.

"We try to live with what we have, we try to overcome the technical obstacles we have but I guess we will probably face some difficulties after a couple of years with the growth we have," Aker says.

"Right now we have about 1.5 million subscribers. The current frequency we have will probably take us to two million or two and a half million, and that's it. We don't want to jeopardise quality just to add numbers of subscribers."

Analyst Hadeel Sakkijha, of Arab Advisors, says the difficulties in obtaining frequency and equipment have had an adverse effect on the network. "The quality of network and service that Jawwal provides to the market suffers because there is more demand than supply," she says.

"The capacity of the network that Jawwal has is not sufficient for the huge demand of the Palestinian market. This affects the services, and it affects the prices as well; since Jawwal is providing relatively low quality services it would be obliged to decrease its prices in order to compensate the services," she says.

An Arab Advisors survey, conducted in October last year, showed that Jawwal's postpaid average connection fees were US$8.86; significantly below the average of other Arab countries, at US$26.90.

Aker says that to handle additional growth Jawwal adds more cell sites with many located on rooftops, often very close together. This, together with improvements in the software that manages and controls the frequency, have enabled Jawwal to add between 200,000 and 300,000 subscribers a year for the past four years. But unless further improvements are made, there will be a limit to the number of subscribers Jawwal can add to its network.

This year, Jawwal set aside US$40 million for capital spending and so far it has spent $22 million. Aker says Jawwal would invest more, but any equipment that is purchased has to pass through Israel.

"It takes months for some reason or another, and that's part of our daily operation to manage the difficulties that we face from the Israeli occupation. But once we have more frequency I'm sure we can add more subscribers with the current infrastructure we have," he says.

Distant switches

The problems experienced by Paltel and Jawwal in getting equipment into Palestine are starkly illustrated by the location of Jawwal's switches, which are 2,240 miles away in London. No other mobile operator in the world has its customers in one continent and its core network stationed in another.

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"The idea of having the London location, with every single local call going to London was crazy," Paltel CEO Abdul Malik Al-Jaber says. "But when we were born as a company we were competing with four monsters, so we had no choice but to take such a risk."

Last month Al-Jaber announced that the switches would be moved to the Dead Sea area of Jordan, with fibre connecting the site to Palestine. The shorter distance is expected to help cut downtime, and it will also help Jawwal to reduce prices, as part of its wider commercial plan.

Aker says peak rate prices will be reduced by a significant percentage this month, with cuts in the region of 30% per minute for mobile-to-mobile calls. Cutting prices might help to shore up its customer base ahead of Wataniya Palestine's proposed launch, but churning the 20% of Palestinians who use Israeli mobile operators may prove to be more difficult. It seems that there are two main obstacles to getting Palestinians off the Israeli networks: price, and network coverage.

Sim cards and top-up vouchers for Israel's four mobile networks are sold in the Palestinian territories, but because the operators are not licenced by the Palestinian Authority they are sold on the black market and are not subject to the same taxes that Jawwal's products are. According to a report conducted four years ago by Beirut-based consultancy firm Connexus it gives Israeli operators a 24% price advantage over Jawwal.

Arab Advisors' Sakkijha says that while Palestinian subscribers are loyal to Jawwal the quality of signal is so bad in some areas of Palestine they have no choice but to take an additional Israeli line for use when their Jawwal mobile fails them.

"For business people, there is multi Sim usage in Palestine," she says. "It is not because they are not loyal. If it came down to loyalty they would only use one Sim card, but because the quality of the services fails to serve them, they have more than one line.

"Some of these people who have more than one line are in the telecoms sector; I know people who work in Jawwal and Paltel who have more than one line, because there are areas in Palestine where there is no network for Jawwal," she says.

With Israel controlling the flow of equipment into Palestine it will not be possible for Jawwal to improve its coverage in those pockets of the Palestinian territories - and take market share from Israel's operator - without Israel acquiescing.

"Maybe Israeli authorities will try to play it smart and prevent them from having full coverage in order to guarantee having the Palestinians using the Israeli operators," Sakkijha says. "I expect Israel to keep on making things hard either for Jawwal and Wataniya, in order for Israeli operators to have their share in the Palestinian market."

Zain attraction

Following Zain's acquisition of Paltel in a share swap deal two months ago, Jawwal is set to be rebranded by the end of the year. It will also join Zain's ‘One Network' borderless roaming scheme, although whether this takes place before or after the rebrand has not been decided. Aker acknowledges the importance of mobile data, but given the limitations of Jawwal's network it will not be included in the data roaming aspect of Zain's ‘One Network'.

Combining with regional behemoth Zain will undoubtedly give Paltel and Jawwal a boost when it comes to competing with Wataniya, which has the backing of Qatar's Qtel, another regional behemoth. There will inevitably be cost savings generated by the increased purchasing power, and Aker says that Zain's international experience will also be of benefit. And Zain's One Network proposition should also help with both customer retention and acquisition, particularly for the many Palestinians with friends and family members living abroad.

But there is a sense that those associated with Jawwal will be sad to see the brand disappear. At last month's Arab Advisors conference, which Jawwal sponsored, Al-Jaber joked that it might be the last time the operator gets to make such a decision. Although it was a light-hearted remark, it hinted at the loss of control that will follow when Zain takes over.

Following approval of the deal by the market authority there will be an assembly meeting to elect a new board, of which Zain will have majority control. Aker has been CEO for five years, but he is unsure if he will remain in the top role once Zain assumes control of the group.

"Maybe. It's still too early to decide that, and it will be up to Zain " he says. "There will be a choice for the CEO, but for the rest of the team we don't expect that Zain will make a lot of changes to the management. On the contrary, we expect our employees will have a value to add to Zain, because we know that Zain needs a lot of human resources to meet its expansion everywhere, and hopefully that will mean there will be the potential for growth for our employees."

Wataniya’s woes

Wataniya Palestine, which was meant to launch during the first half of this year, has said it will demand that the Palestinian Ministry of Telecom and Information Technology return the US$140 million it has so far paid for its licence unless it receives the frequency it needs to launch.

The nascent operator has a temporary strip of 2.4 MHz on 900 MHz band and so far, Israel is yet to release the agreed permanent frequencies, which total between 4.8-6.8MHz. CEO Allan Richardson dismissed the suggestion by Israel's Ministry of Communications that the focus on unreleased spectrum was an attempt to divert attention from their network not being ready.

According to the Office of the Quartet, Wataniya Palestine will be responsible for a total of US$700 million of investment in Palestine's beleaguered economy over a 10 year period, creating at least 750 jobs.